Are you ready to start or expand a dental practice? Let’s face it, financing the purchase of a medical office building can be a daunting task. Because of the high cost of building improvements (customized plumbing, construction of exam rooms, lead walls for x-ray or surgery units, etc.) and the additional costs for furniture, fixtures and specialized equipment, purchasing and improving a medical office can become a complex and expensive endeavor. But there’s a solution!
Whether you’re just opening your first practice, or are ready to open a second, third or even tenth medical office, the SBA 504 Loan Program is ideally suited to help you. SBA 504 loans are a great tool for medical professionals. We’ve worked with countless healthcare businesses in our 35 years as a Certified Development Company. SBA 504 financing works well because, in contrast to conventional financing, the 504 offers attractive financing terms and down-payments as low as ten percent.
Why SBA 504 Loans Are Perfect for Buying or Expanding Dental Practices
Consider this:
- SBA 504 loans can finance any hard asset, such as the purchase of real estate, purchase of land, construction of a new building, purchase and renovation of an existing building and/or the purchase of new equipment. Plus, as long as there is owner-occupied commercial real estate, the loan can include total project costs, such as: appraisals, architectural costs, surveys, furniture, office equipment, phones, security systems, landscaping, parking lots, signage, etc. Basically, anything involved in the real estate. Takeaway: financing total project costs reduces upfront, out-of-pocket expenses and allows medical professionals to preserve their cash.
- 504 loans can offer 90 percent loan-to-cost financing. While conventional loans typically require a 20-30 percent down-payment, the 504 typically finances 90% of the total project costs, including the land, construction/renovations, soft costs and closing costs. Takeaway: 90% financing is a clear advantage as the medical professional is able to preserve capital and use it to grow their practice in other ways.
- The SBA 504 Loan Program provides low, long-term interest rates. The low rates are then fixed for up to 25 years for real estate purchases or 10-years for new equipment. Takeaway: The long loan amortizations allow for smaller monthly payments thereby minimizing the impact on business cash flow.
The low, fixed interest rates being offered by the SBA 504 Loan Program for a building purchase can help medical professionals, by a wide margin, to beat the high lease rates and unpredictability offered by today’s leasing market.
Top 4 Reasons To Buy or Construct a Building for Your Dental Practice
There are many reasons you should consider buying or constructing a building for your business, but here are the top four:
Property Ownership Benefits
- Tax advantages
- No more payments to landlords or rising
- rent costs
- Flexibility to renovate for the specific needs of the business
Cash Flow Management
- Conserves working capital with a lower down payment requirement
- Budget friendly – predictable payments and no future balloons
- Lower interest rates
- Terms are fixed for up to 25 years.
Debt Management
- Consolidate commercial debt into a long-term, fixed-rate refinance
- More favorable financing terms
- Access to working capital for business expenses
Growth Opportunities
- Expand operations
- Invest in valuable assets without short-term debt
- Flexibility to purchase, construct, and/or renovate commercial real estate -OR- for investing in heavy machinery/equipment
- Roll the cost of furniture, fixtures, and fees into the SBA 504 loan
- SBA 504 lending limits are generous…up to $5 million…with no limit on the overall project size.
The SBA 504 Program was designed to make building ownership possible for small business owners by pairing it with the best terms on the market. It is the most affordable way to purchase a building. Plus, when the SBA 504 Program is utilized for a building purchase or new construction, mortgage payments are often comparable to, and sometimes even less than, rent payments.
Consider a 504 Loan
A Small Business Administration 504 loan is a sound option for medical offices looking to purchase a building for their business. Whether you’re expanding to a new location or would prefer to own rather than lease, the 504 loan can offer unbeatable terms.
Highlights of SBA 504 loans include:
- Low down payment: Paying only 10% of the purchase price allows business owners to conserve working capital.
- Low, long-term fixed interest rate: A fixed-rate loan fully amortized over 25 years means your monthly payment stays the same, and there is no balloon payment at the end of the term.
- No additional collateral: The only collateral required is the subject property.
- No loan limit on the total project cost, and up to $5 million for the SBA 504 portion: You can think big.
- Support: Business owners who utilize the SBA 504 program get ongoing support from a certified development company, such as Growth Corp. The CDC guides business owners through the loan process, helps with the paperwork and application, and is a partner throughout the life of the loan.
- Versatility: While SBA 504 loans are most commonly used for real estate, they can also be used to renovate existing facilities, purchase equipment with a service life of 10 years or more, and refinance commercial real estate debt. It also includes total project costs, so fees, furniture, and fixtures can be included as well.
SBA 504 Loan Structure
Typical structures for the 504 Loan Program involve a partnership between a non-profit CDC (such as Growth Corp), a participating bank, credit union or other lending institution and the borrower.
- 40% of the total project cost is provided by a non-profit CDC
- 50% of the total project cost is provided by a participating lender (typically a bank)
- 10% of the total project cost is provided by the applicant small business borrower
Remember, SBA 504 Loans are offered in conjunction with your preferred banking partner…not in competition with them.
Starting or expanding your dental practice is a huge step. It requires strategic planning, a vision for patient care, and most importantly, quality capital to turn your plans into reality. One of the most effective financing tools for dental practices is the SBA 504 Loan Program. SBA 504 loans offer tailored solutions to help you build, purchase, or expand your dream dental office.
Whether you’re just opening your own medical practice, or are ready to open a second, third or even tenth office, we’re here to help. We’ve worked with thousands of professionals just like you and we understand the expenses that go into purchasing and furnishing high-end professional offices.
Learn More
If you’re a dental professional with dreams of starting or expanding your medical practice, discuss the SBA 504 Loan Program with your local financial institution or the experts at Growth Corp. What you’re able to achieve with the assistance of the SBA 504 Loan Program may just surprise you!